Hi,
My query is related to the employer contribution to Gratuity Fund Manager and is it possible for an employee to influence it?
Detailed Scenario:
An employee X in an organization Y has completed more than 25 years of service and is still continuing to work there in Y. As per the gratuity calculation formula, X’s eligible gratuity amount is over 20L INR. Y’s policy states that the maximum gratuity amount payable to its employees is 20L INR. (No additional amount as ex-gratia).
In the salary letter of X, there is a component showing an amount under “Employer Contribution to Gratuity” (which is 4.81% of X’s basic pay). As this amount is no longer contributing to the increase in Gratuity amount that will be paid upon retirement of X, can X request Y’s HR/Benefits team to move this amount to other heads like NPS or VPF? Is this possible as per law?
Thank you.
Jothis
Including the Gratuity component in the CTC structure is a common practice across many industries in India. However, it’s important to note that this inclusion has no direct link to compliance with social security legislations like the Payment of Gratuity Act. Regardless of whether Gratuity is shown as part of the CTC, companies are legally obligated to pay Gratuity to eligible employees.
When it comes to payouts exceeding ₹20 lakh, if the appointment letter doesn’t specify an “over and above” Gratuity provision, the decision ultimately lies with the company’s management. In such cases, it may be worth revisiting the CTC structure and redistributing the amount elsewhere.
Let’s hear from fellow members who have encountered a similar situation.
In such cases, it may be worth revisiting the CTC structure and redistributing the amount elsewhere.
Is the company allowed to do so, as per law? Like stopping the gratuity contribution corresponding to an employee just because her/his total gratuity value has exceeded 20 Lakhs.